That may not sound very appealing. But bidding for the failed units of Bank of New England Corp. has turned into a heated contest. The short list of suitors reads like a Who's Who of the financial world. Possible buyers range from BankAmerica Corp., the nation's second-largest bank, to Wall Street's master dealmaker, Kohlberg Kravis Roberts & Co.

Why the fuss? BNE may turn out to be one of the finest banking trophies yet sold by the government. With 323 branches spread across Massachusetts, Connecticut, and Maine, BNE has an appealing consumer franchise. Sources close to the deal say the Federal Deposit Insurance Corp., which is managing the sale, would like the buyer to put in fresh capital of at least $750 million--the amount the FDIC has so far paid outof its Bank Insurance Fund to bol-ster BNE.

But the FDIC is throwing in some alluring incentives, sources say. While the buyer may get about $14 billion in earning assets, including commercial and consumer loans, it won't have to eat any bad loans. The FDIC will likely spin off BNE's nonperforming assets, including $5 billion to $6 billion in mostly nonperforming real estate loans, into a separate pool. The winning bidder will receive a fee for managing the bad loans, which will be acquired by the FDIC.

'INCREDIBLE.' After the deal is done, the new owner will have the healthiest bank in recession-ridden New England--and one of the strongest in the country. Judging from past sales of failed banks, the potential profits are huge. "It's an incredible deal," says an executive at one of the companies bidding for BNE. "You are almost certain to make money. The question is how much."

The FDIC's handling of the BNE sale, the largest of the recent banking crisis, is being watched closely for what it may portend for future rescues. The agency has already come under fire from some critics in Congress. They allege that past bailouts, such as the buyout of First Republic, based in Dallas, by NCNB Corp., of Charlotte, N. C., and the purchase of MCorp's failed units by Banc One Corp., in Columbus, Ohio, included unjustified incentives. A recent report by the House Budget Committee suggested that the generous terms may have given the buyers an unfair competitive advantage over other Texas banks. Says Representative Charles E. Schumer (D-N. Y.): "These findings will prompt me to keep a sharp eye on the final arrangements that are made with the disposition of the Bank of New England."

But the FDIC may have little choice but to give BNE buyers a sweet deal. Some bidders might be willing to offer more than the $750 million the FDIC wants. But regulators, who will evaluate many other factors in picking the winner, will likely be reluctant to ask for more for fear that higher bids might weaken the buyer's financial base. Most major banks couldn't even consider a bid because of their depleted capital bases. The battle for BNE began shortly after it was seized by the FDIC on Jan. 6. Burdened by acres of bad real estate loans, BNE had announced a few days earlier that it lost $400 million in the final quarter, which set off a run on the bank. Within days of the FDIC takeover, a team of 40 executives from Bank of America descended on BNE's downtown Boston headquarters to review its books. Since then, legions of bankers from institutions such as KeyCorp in New York, CoreStates Financial in Philadelphia, and even Banque National de Paris have sifted through BNE's remains.

Handicapping the bidders is far from easy. Many analysts believe BofA has the best shot. Its strength lies in the kind of retail banking that BNE once prided itself in. And it has deep pockets. With $110 billion in assets, it earned $1.1 billion last year. Its capital base is among the strongest in the industry. Just as important, BofA has endeared itself to Washington. At a time when regulators are trying to dump insolvent savings and loans, BofA has acquired nine failed thrifts in the past year.

Another strong contender is Banc One. With an equity-to-asset ratio of 9.5% and a relatively healthy loan portfolio, Banc One is considered among the strongest banks in the country. Moreover, it has proven itself a successful manager of acquisitions. The super-regional has acquired 97 banks and thrifts over the past 22 years. Still, one of those acquisitions could hurt its chances. After purchasing the failed units of MCorp in 1990, Banc One has already been a beneficiary of the FDIC's largesse.

Frightened by the prospect of a powerful, non-New England bank entering its market, Bank of Boston Corp. is also in hot pursuit of BNE's franchise. Its top executives have been preaching to state and federal lawmakers about the evils of selecting a carpetbagger. They say that a local merger would reduce excess capacity in the region. "We're overbanked, overbranched, and we need industry consolidation" in New England, says Bank of Boston President Charles K. Gifford. Further, he says, outsiders could drain away business from the area's already weakened banks. The House Budget Committee report found that NCNB's share of deposits in Texas jumped to 17.8% from 13.9% within nine months after its purchase of First Republic. Banc One also made large market-share gains, the report says.

So far, those arguments have generated little support. Few businesses or politicians are backing Bank of Boston, in part because they aren't convinced that an outsider will harm local banks. Indeed, many believe a strong outside bank would be in better shape to lend money and possibly alleviate New England's severe credit crunch.

On top of this, Bank of Boston doesn't have the wherewithal to buy BNE. Sources familiar with the bidding process say the FDIC would expect the Bank of Boston to come up with more cash than it is requiring of other bidders to compensate for a weak capital position. Bank of Boston's real estate helped produce a $395 million loss last year. Its capital base declined slightly even though it reduced its dividend and eliminated 2,800 jobs. Analysts say the success of the bank's bid will depend on its ability to attract new capital. Many believe the bank has approached several investors about a deal. Bank of Boston declined comment.

PREDATOR IMAGE. Still, if the FDIC wants to be sensitive to such regional concerns, KKR may have the inside track. The investment firm is making a joint bid with Providence-based Fleet/Norstar Financial Group. Even though it lost $49 million last year because of New England's real estate woes, Fleet is considered among the best-run banks in the region. For its part, KKR will provide as much as 80% of the cash by tapping its longtime customers, mainly pension funds.

By allying itself with Fleet, KKR could soothe critics who might otherwise cringe at the thought of awarding a lucrative government deal to one of the biggest practitioners of leveraged buyouts. Many analysts believe KKR lost out on the bidding for MCorp in 1989 because of its Wall Street predator image. But don't look for KKR to remain a New England banker if it wins. Wall Street analysts expect the investment firm to sell off its BNE interest in a few years, when the bank should have recovered fully. Such a sale could generate returns of 24% to 40%, analysts say.

The FDIC hopes to select a winner by spring. The deadline for all bids is Mar. 29. Regulators are under pressure to conclude a deal swiftly, because continuing uncertainty about BNE's future is bound to drive more depositors away. A final deal will put an end to the problem-ridden life of New England's fourth-largest bank. But if the winner receives as good a deal as many observers expect, the controversy over the FDIC's handling of banking bailouts could be just heating up.Geoffrey Smith in Boston, with Catherine Yang in Washington, Zachary Schiller in Cleveland, Leah Nathans Spiro in New York, and Joan O'C. Hamilton in San Francisco